Quote:
Originally Posted by bsg75
It is well known by everyone in the industry that Amazon et al. LOSE MONEY on eBook sales. Barnes & Noble types are looking to make profits in the future and battling for market share, but there's no profit in eBooks as of right now. They pay publishers about $12 for NYT bestsellers, half the price of the hardcover, and they take a loss with each sale at the $9.99 promotional price.
The fact is that profit margins on eBook readers are LARGE--at least relative to, say, computers. I can believe Astak has a thinnish margin, but the actual manufacturing costs are pretty low. A display module runs $30-$40. Wireless modules and touchscreen assemblies are the only other expensive parts. Isuppli has done a teardown of the Kindle 2 and it costs $185 to build, vs. $299 retail. That's a VERY healthy margin. (Of course, the Kindle's selling price includes free lifetime wireless data service.) With no wireless module and a smaller screen with less grayscale, the Pocket Pro should cost well under $150 to manufacture. Maybe around $100, I'd hazard to guess. Don't get me wrong, I still want one. I just like to think I'm learned enough to know I'm paying something of a premium.
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I agree that a lose money strategy is not sustainable in the long run, but consider that Isuppli calculations only take into account the bill of materials, and you need to add the cost for assembly, shipping from the other side of the world, distribution, marketing, channel margins, etc etc
I don't think they lose money, but I don't believe the profit is big either that's why they need high volumes to make it worthy (if profit is sizable, capitalism kicks in and suddenly everyone is selling ebook readers :-)
Regards, Wolf.